New health-care fee draws fire

Insurers, government squabble over whether a provision of the new health law will hike premiums

By

JonnelleMarte

Health insurers and small business groups are drawing attention to a little-noticed provision of the Affordable Care Act they say will raise individual premiums hundreds of dollars a year.

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A new fee, intended to help expand coverage to more Americans, will cost insurers $8 billion in 2014 — a little less than 2% of the roughly $500 billion in insurance premiums subject to the charge — and rise to $14.3 billion by 2018. The costs, which analysts expect will be passed on to consumers, would amount to an additional $2,171 in premium costs over the next decade for a single person, or $5,140 for a family of four, according a report released this month that was commissioned by a trade group for health insurers.

Not all Americans will feel the pinch, however. The higher premiums will mostly apply to those who can’t buy insurance through their employers and make too much to qualify for a federal subsidy, says Matthew Coffina, senior equity analyst for Morningstar. Of the nine million people projected to buy health coverage on the new insurance exchanges being created as part of the health law in 2014, one million of them will do so without subsidies, according to the Congressional Budget Office; only those workers who make less than 400% of the federal poverty level (or about $45,000 for an individual) qualify.

Most other Americans will be able to offset or avoid the higher costs altogether. Three out of five workers who get insurance from their employers are in a plan where the employer — and not the insurance company — is responsible for paying their workers’ medical bills, according to an annual health benefits survey by the Kaiser Family Foundation and the Health Research & Educational Trust. Those types of premiums are exempt from the fee, meaning that the costs are unlikely to be passed on to those workers. With more companies expected to move to this model, fewer workers will be affected by the new tax, says Phil Seligman, an equity analyst with S&P Capital IQ.

Supporters of the health-care overhaul say revenue from the fee on health insurers, along with other new medical industry taxes and fees, are intended help bring coverage to more Americans. In a statement, a spokeswoman for the Center for Medicare & Medicaid Services said it’s misleading to focus on one provision of the law, since “taken together, the law will reduce costs” for young people and families.

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